As filed with the Securities and Exchange Commission on February 26, 1999
Registration No. 33-45437
File No. 811-6549
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
-------------------------------------------------------
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 9 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [X]
ACT OF 1940
Amendment No. 13 [X]
(Check appropriate box or boxes)
AMERICA'S UTILITY FUND, INC.
(Exact name of registrant as specified in charter)
901 East Byrd Street
Richmond, Virginia 23219
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code (804) 775-5719
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Paul F. Costello, President
901 East Byrd Street
Richmond, Virginia 23219
(Name and address of agent for service)
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Copy to:
Timothy W. Diggins, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
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It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on [date] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[X] on May 3, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
PROSPECTUS May 3, 1999
America's Utility Fund, Inc.
Managed by Mentor Investment Advisors, LLC
This prospectus contains information you should know before you invest. Please
read it carefully and keep it with your investment records.
The Securities and Exchange Commission has not approved or disapproved these
securities and does not guarantee the accuracy or adequacy of the information in
this prospectus. Any statement to the contrary is a criminal offense.
<PAGE>
Contents
FUND SUMMARY.................................................................1
I. Objective, Principal Investment Strategies, and Principal Risks....1
Objective..................................................1
Principal Investment Strategies............................1
Principal Risks............................................2
II. Performance Information, Fees and Expenses........................3
Performance Information....................................3
Fees and Expenses..........................................4
GENERAL INFORMATION..........................................................5
Investment Manager.....................................................5
Pricing of Fund Shares.................................................5
How to Invest In the Fund..............................................6
Investing Through a Plan...................................6
Investing Through a Single Investment......................6
Dividends and Distributions............................................7
Redeeming Shares. ....................................................8
Taxes..................................................................8
OTHER INVESTMENT STRATEGIES AND RISKS........................................9
OTHER INFORMATION...........................................................11
Changes in Policies...................................................11
Portfolio Turnover....................................................11
Securities Ratings....................................................11
Temporary Defensive Investing.........................................11
FINANCIAL HIGHLIGHTS........................................................11
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<PAGE>
FUND SUMMARY
I. Objective, Principal Investment Strategies, and Principal Risks.
Objective. America's Utility Fund, Inc. seeks current income and moderate
capital growth by investing primarily in securities issued by utility companies.
Principal Investment Strategies. The Fund's investments in utility
companies may include both equity securities, such as common and preferred
stock, and debt securities, such as bonds. Mentor Investment Advisors, LLC
("Mentor Advisors"), the Fund's investment manager, selects the Fund's
investments based on Mentor Advisor's evaluation of which investments will best
help the Fund to achieve its objective.
The Fund normally invests at least 65% of its total assets, measured at
the time of the Fund's purchase of any particular investment, in securities
issued by utility companies. The Fund may invest the balance of its assets in
other securities Mentor Advisors believes offer the potential for producing
current income or capital growth, or both. The types of investments held by the
Fund will vary with Mentor Advisors' view of general economic and market
conditions, such as, for example, changes in interest rates. These investments
may include common stock and other equity securities issued by non-utility
companies, as well as debt securities, such as U.S. government securities and
corporate bonds, notes, and debentures.
"Utility company" is a company that Mentor Advisors determines derives at
least 50% of its assets, profits, or revenues from one or more of the utility
company activities described below. This determination is made at the time of
the Fund's purchase of a company's securities. Utility company activities
include manufacturing, producing, generating, transmitting, selling, or
distributing electricity or gas energy. Utility company activities also include
those relating to the telecommunications industry and its operations, such as
telephone, telegraph, wireless, satellite, microwave, and other communications
systems.
Debt securities purchased by the Fund will be rated, at the time of
purchase, within or above the Standard & Poor's Ratings Service BBB or the
Moody's Investors Service, Inc. Baa rating categories, or considered to be of
comparable quality by Mentor Advisors.
The Fund's investments may include the securities of both U.S. and foreign
issuers, and may be denominated in either the U.S. dollar or in foreign
currencies. The Fund may purchase and sell foreign currencies, and may use
foreign currency forward and futures contracts for hedging purposes.
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<PAGE>
Principal Risks.
o Concentration Risk. Because the Fund's investments are concentrated
in utility companies, the value of the Fund's shares may fluctuate
more widely than those of funds investing in a broader range of
industries and companies. The "Other Investment Strategies and
Risks" section further discusses utility companies and the risks
associated with investing in their securities.
o Equity Risk. Equity securities may decline in value in response to
factors relating to the issuer, such as poor management decisions or
falling demand for a company's goods or services. Similarly, factors
affecting a company's particular industry, such as increased
production costs, may affect the value its equity securities.
Equity securities also may fall in value as a result of factors
affecting entire financial markets, such as political or economic
developments, or changes in investor psychology. These risks may be
greater for investments in the securities of smaller companies.
o Fixed Income Investment Risk. The Fund's investments in debt
securities such as bonds, notes, and asset backed securities are
obligations of the issuer to make payments of principal and/or
interest on future dates. As interest rates rise, the Fund's debt
security investments are likely to be worth less. This risk is
generally greater for debt securities with longer maturities, and
may be compounded for investments in mortgage-related or other
asset-backed securities that may be prepaid. These securities have
variable maturities that tend to lengthen when that is least
desirable - when interest rates are rising. Fixed income investments
also carry the risk that the issuer or the guarantor of a security
will be unable or unwilling to make timely principal and/or interest
payments, or to otherwise honor its obligations. Varying degrees of
such credit risk, often reflected in credit ratings, apply.
Investments in foreign securities are often subject to increased
credit risk because of the difficulties of requiring foreign issuers
to honor their contractual commitments.
o Foreign Investment Risk. Foreign investments may experience more
rapid and extreme changes in value than U.S. investments. The
securities markets of many foreign countries are relatively small,
with a limited number of companies representing a small number of
industries. Additionally, foreign securities issuers are
usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of foreign
countries differ, in some cases significantly, from U.S. standards.
Also, nationalization, expropriation or confiscatory taxation,
currency blockage, political changes or diplomatic developments
could adversely affect the Fund's investments in a foreign country.
In the event of nationalization, expropriation or other
confiscation, the Fund could lose its entire investment.
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<PAGE>
o Currency Risk. Investments in securities denominated in, and
receiving revenues in, foreign currencies will be subject to
currency risk. This is the risk that those currencies will decline
in value relative to the U.S. Dollar, or, in the case of hedging
positions, that the U.S. Dollar will decline in value relative to
the currency hedged.
The Funds' shares will change in value, and you could lose money by
investing in the Fund. The Fund may not achieve its objective. An investment in
the Fund is not a deposit with a bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
II. Performance Information, Fees and Expenses.
Performance Information. The following information provides some
indication of the Fund's risks. The bar chart shows changes in the Fund's
performance for the last six calendar years. The table following the bar chart
compares the Fund's performance to that of the Standard & Poor's Utility Index.
The Fund's past performance is not an indication of future performance.
Calendar Year Total Returns
[plot points]
1998.. 15.47%
1997.. 23.31%
1996.. 5.46%
1995.. 32.30%
1994.. -13.10%
1993.. 13.26%
During the periods shown in the bar chart, the highest return for a
quarter was 13.26% (quarter ending 12/31/97), and the lowest return for a
quarter was -10.96% (quarter ending 3/31/94).
Average Annual Total Returns
(for periods ending 12/31/98)
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Past One Year Past 5 Years Since
Inception
(05/05/92)
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America's Utility 15.47% 11.54% 12.48%
Fund
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S&P Utility Index 14.77% 14.04% 14.53%
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<PAGE>
Fees and Expenses. The information in the expense table below is designed
to give you an idea of what you should expect to pay in expenses as an investor
in the Fund.
Shareholder Fees (fees paid directly from your investment)
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None
Annual Fund Expenses (expenses deducted from Fund (as a % of average
assets) net assets)
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Management Fee 0.26
Other Expenses
Shareholder Service Fee 0.25
Administrative Service Expense 0.39
Other 0.41
Total Other Expenses 1.05
Total Annual Operating Expenses 1.31
The Examples below translate the "Total Annual Operating Expenses" shown
in the preceding table into dollar amounts. This allows you to more easily
compare the costs of investing in the Fund with those of other mutual funds.
They assume that you invested $10,000 over the years indicated, reinvested all
distributions, and earned a hypothetical 5% annual return.
Investors should keep in mind that the examples are for comparison
purposes only. The Fund=s actual performance and expenses may be higher or
lower. Expenses are based on the Fund's last fiscal year.
Examples Year
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1 $ 133
3 $ 415
5 $ 718
10 $ 1,579
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<PAGE>
GENERAL INFORMATION
Investment Manager. The Funds= investment manager is Mentor Investment
Advisors, LLC, located at 901 East Byrd Street, Richmond, Virginia 23219. Mentor
Advisors has been retained by the Fund's Board of Directors to furnish a
complete investment program for the Fund. Subject to the oversight of the Board
of Directors, Mentor Advisors employs a team of investment professionals to make
investment decisions on behalf of the Fund consistent with the Fund's stated
objective. The Fund pays Mentor Advisors a monthly management fee, calculated
daily, based on the Fund's average daily net assets. The Fund paid Mentor
Advisors an aggregate management fee of 0.26% of average net assets for the
Fund's fiscal year ended December 31, 1998.
Mentor Advisors has over $14 billion in assets under management and is a
wholly owned subsidiary of Mentor Investment Group, LLC ("Mentor") and its
affiliates. Mentor is a subsidiary of Wheat First Butcher Singer, Inc., which is
in turn a wholly owned subsidiary of First Union Corp. ("First Union"). First
Union is a leading financial services company with approximately $240 billion in
assets and $17 billion in total stockholders' equity as of March 31, 1999.
EVEREN Capital Corporation has a xx% ownership in Mentor.
Mentor, itself or through Mentor Services Company, Inc., a wholly owned
subsidiary of Mentor, provides shareholder support services to the Fund and its
shareholders. Mentor also serves as Administrator to the Fund pursuant to an
Administrative Services Agreement that limits the aggregate of the Management
Fee and Administrate Services Expenses to 0.65% per year.
The Fund receives services from a number of providers which rely on the
smooth functioning of their respective systems and the systems of others to
perform those services. It is generally recognized that certain systems in use
today may not perform their intended functions adequately after the Year 1999
because of the inability of computer software to distinguish the Year 2000 from
the Year 1900. Mentor Advisors is taking steps that it believes are reasonably
designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Fund's other major service providers. There can be no assurance, however, that
these steps will be sufficient to avoid any adverse impact on the Fund from this
problem. Additionally, companies and other issuers of securities in which the
Fund invests may be adversely affected by the Year 2000 problem, which in turn
may have an adverse affect on the value of the Fund's investments.
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<PAGE>
Pricing of Fund Shares. The Fund calculates its net asset value per share
by dividing the total value of its assets, less liabilities, by the numbers of
its shares outstanding. Net asset value is computed once daily as of 4:00 P.M.
on each day the New York Stock Exchange is open for trading. Fund portfolio
securities for which market quotations are readily available are stated at
market value. Short-term investments that will mature in 60 days or less are
stated at amortized cost, which approximates market value. All other securities
and assets are valued at their fair values.
Securities quoted in foreign currencies are translated into U.S. dollars
at the current exchange rates or at such other rates as may be used in
accordance with procedures approved by the Board of Directors. As a result,
fluctuations in the values of such currencies in relation to the U.S. dollar
will affect the net asset value of Fund shares even though there has not been
any change in the values of such securities as quoted in such foreign
currencies.
How to Invest In the Fund. You may invest in the Fund either through an
installment plan (a "Plan"), or by a single initial investment with a higher
minimum investment amount. Shares of the Fund are sold at the net asset value
next determined after a purchase order in good order is received by the Fund,
whether by installment or single payment method.
o Investing Through a Plan. An investor may enroll in a Plan to make
regular monthly payments to the Fund over the course of a year, by
selecting the monthly payment amount on the Plan enrollment form.
After receipt of an investor's monthly payment, the Fund will credit
the investor's account with shares in the Fund and any fractions
thereof, priced at the net asset value next determined after receipt
of the payment in good order. Similarly, dividends and distributions
declared by the Fund will be reinvested in additional Fund shares
unless an investor otherwise notifies the Fund in writing.
o Investing Through a Single Investment. Alternatively, an investor
may make a single initial investment in the Fund. This requires a
minimum initial investment of $1,000 and is the method required for
establishing an IRA ($250 minimum initial investment for an IRA) or
other retirement plan account. The Fund will credit such an
investor's account with shares in the Fund and any fractions thereof
priced at net asset value next determined after receipt by the Fund
of an enrollment application and accompanying payment in good order.
Additional investments may be made at any time in amounts of $40 or
more ($100 or more for IRA accounts). Investors using the single
payment method may also participate in a monthly installment plan,
if desired.
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<PAGE>
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Investment Through an Installment Plan Investment By Single Initial Payment
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1. To invest by making monthly 1. To invest in the fund by single
installment payments from your bank initial payment, complete the
account via "ACH", complete and sign appropriate portion of the enrollment
an Automatic Monthly Investment application and mail the enrollment
Application Form and mail it to application, with a check payable to
America's Utility Fund, P.O. Box 8507, America's Utility Fund, P.O. Box
Boston, MA 02266 no later than the 8507, Boston MA 02266. If you do not
date specified on the enrollment have an enrollment application, you
application. may call Mentor Services Company at
800-487-3863 to obtain one.
2. Decide how much you want to invest
each month. Your monthly investment 2. Individual Retirement Accounts
can be any dollar amount that is forty (IRAs) and other retirement accounts
dollars ($40.00) or more. Make sure are established by single initial
that you choose an amount that you can payment, and require separate
afford each month. Investments over enrollment documentation. If you are
the amount of your monthly installment interested in an IRA, call us at
will be accepted and invested in Fund 1-800-487-3863 to request our IRA
shares. enrollment kit.
3. To invest by making monthly 3. The minimum initial investment is
installment payment via check, you $1,000 ($250 for an IRA) or more.
should mail your check and account Subsequent investments can be made,
investment coupon (located on the whenever you wish, in amounts of $40 or
bottom portion of each transaction more except for IRAs, which require
confirmation statement) each subsequent investments in amounts of
month to America's Utility Fund, $100 or more.
P.O. Box 8507, Boston MA 02266.
All installment payments should
be made by check made payable to
America's Utility Fund, Inc.
4. If during your first year of
participation in a Plan you stop
participating for any reason prior
to your Plan's completion and you
request a redemption of your share
account, you will receive cash in an
amount equal to the then current
net asset value of your shares in
the Fund.
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Dividends and Distributions. All dividends and capital gain distributions
on Fund securities will be reinvested in additional Fund shares for your account
on the payment date, unless in a written notice received by the Mentor Services
Company not less than five business days prior to the payment date, you elect to
receive such dividends and distributions in cash. Once the Fund receives such
written notice of election to receive cash distributions, the Fund will continue
to pay all such distributions in cash until otherwise instructed in writing by
you.
Dividends of ordinary income will normally be paid by the Fund quarterly,
and long-term capital gains, if any, will normally be paid annually. Investors
must report on their income tax form both dividends and capital gains, whether
received in cash or reinvested in additional Fund shares.
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<PAGE>
Redeeming Shares. Regardless of whether your participation in the Fund is
through a Plan or by the initial payment method, you may redeem all of your
account and terminate your participation at any time by sending a written
request for full redemption to the Fund or by calling Mentor Services Company at
800-487-3863. You can also redeem portions of your account.
The Fund may redeem and terminate those shareholder accounts which fall
below a minimum investment balance of $240. Effective September 1, 1999, the
minimum investment balance will be $1,000. If your account investment balance is
less than the required minimum, you will be given 60 days notice in which to
invest a sufficient amount to establish the minimum investment balance prior to
an involuntary redemption and termination by the Fund. However, new installment
accounts established after August 1998 will have 30 months from the date of
first investment to reach the $1,000 minimum.
All requests for redemptions made to Mentor Services Company in writing
must be signed by the shareholder(s) of the account, in the name(s) as shown on
the account statement. It is suggested that all written redemption requests be
sent by certified mail, return receipt requested. The Fund's custodian or Mentor
Services Company may require certain documentation. If the cash redemption is
$25,000 or more, your written redemption request must have your signature
guaranteed by a commercial bank, trust company or broker. All documents must be
in proper order before any redemptions can be made. The redemption price will be
the net asset value next determined after such documents have been received in
proper order. Your request should be sent to America's Utility Fund, c/o [Boston
Financial Data Services, 2 Heritage Drive, N. Quincy, MA 02171.]
The Fund may also redeem shares if you own shares of the Fund above any
maximum amount set by the Fund's Board of Directors. There is presently no
maximum, but the Board of Directors may establish one at any time, which could
apply to both present and future shareholders.
Under unusual circumstances, the Fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal securities laws. As
long as the right of redemption of shares of the Fund is suspended, no shares
may be redeemed, and therefore no cash withdrawals may be made. In addition, the
Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption by making payment in whole or
in part by securities valued in the same way as they would be valued for
purposes of computing the Fund's per share net asset value. If payment is made
in securities, a shareholder may incur brokerage expenses in converting those
securities into cash.
Taxes. The Fund intends to qualify as a "regulated investment company" for
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<PAGE>
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund will distribute substantially all of its
net investment income and capital gain net income on a current basis.
All Fund distributions will be taxable to shareholders as ordinary income,
except that any distributions of net capital gain will be taxed as long-term
capital gain, regardless of how long a shareholder has held the shares (although
the loss on a sale of shares held for six months or less will be treated as
long-term capital loss to the extent of any capital gain distribution received
with respect to those shares). Long-term gains generally are taxable to
individuals at a maximum rate of 20%. Distributions will be taxable as described
above whether received in cash or in shares through the reinvestment of
distributions. Early in each year the Fund will notify shareholders of the
amount and tax status of distributions paid by the Fund for the preceding year.
In buying or selling securities for the Fund, Mentor Advisors will not normally
take into account the effect any purchase or sale of securities will have on the
tax positions of the Fund's shareholders.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. Dividends and distributions also may be subject to state,
local, and foreign taxes. Shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state, local, or foreign taxes.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to United States withholding tax.
OTHER INVESTMENT STRATEGIES AND RISKS
Utility Companies. Many utility companies, especially electric, gas, and
other energy-related utility companies, have historically been subject to risks
of increase in fuel costs and other operating costs, changes in interest rates
on borrowings for capital improvement programs, changes in applicable laws and
regulations, changes in technology which may render existing plants, equipment,
or products obsolete, the effects of energy conservation and operating
constraints, and increased costs and delays associated with compliance with
environmental regulations. In particular, regulatory changes could increase
costs or impair the ability of utility companies to operate their facilities or
obtain adequate return on invested capital. Generally, prices charged by
utilities are regulated in the United States and in foreign countries with the
intention of protecting the public while ensuring that utility companies earn a
sufficient return to attract capital for growth while providing appropriate
services. There can be no assurance that such pricing policies or regulated
rates of return will continue in the future.
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<PAGE>
In recent years, regulatory changes in the United States have increasingly
allowed utility companies to provide services and products outside traditional
geographic areas and lines of business, creating new areas of competition within
the utilities industries. This trend toward deregulation and the emergence of
new entrants have caused non-regulated providers of utility services to become a
significant part of the utilities industries. Mentor Advisors believes that the
emergence of competition and deregulation will result in certain utility
companies being able to earn more than their traditional regulated rates of
return, while others may be forced to defend their core businesses from
increased competition and may be less profitable. Although Mentor Advisors seeks
to take advantage of favorable investment opportunities that may arise from
these structural changes, there can be no assurance that the Fund will benefit
from any such changes.
Derivatives. Derivatives, which include futures contracts and other
instruments, are financial instruments whose values are derived from another
security, an index or a currency. The Fund may use derivatives for hedging
(attempting to offset a potential loss in one position by establishing an
interest in an opposite position). This includes the use of currency-based
derivatives for hedging its positions in non-U.S. dollar-denominated securities.
While hedging can guard against potential risk, it adds to the Fund's
expenses and can eliminate some opportunities for gains. There is also a risk
that a derivative intended as a hedge may not perform as expected. The main risk
with derivatives is that some types can amplify a gain or loss, potentially
earning or losing substantially more money than the actual cost of the
derivative. With some derivatives there is also the risk that the counterparty
may fail to honor its contract terms, causing a loss for the Fund.
Management Risk. Although the Fund may have the flexibility to use some or
all of the investment strategies, securities and derivative instruments
described in this prospectus and in the SAI, the Mentor Advisors may choose not
to use a particular strategy or type of security for a variety of reasons. These
choices may cause the Fund to miss opportunities, lose money or not achieve its
objective.
Real estate investment trusts (REITS). The Fund may invest in REITS, which
are managed vehicles that invest in real estate or real estate-related assets.
Factors typically affecting the value of investments in REITS include those
affecting real estate investments generally such as supply of real property in
various markets, changes in zoning laws, construction, completion rates, changes
in real estate values and property taxes, levels of occupancy, and adequacy of
rents to cover operating expenses. The performance of real estate investments
may also be affected by changes in interest rates, prudent management of
insurance risks, and social and economic trends.
Repurchase Agreements. The Fund may buy securities with the understanding
that the seller will buy them back with interest at a later date. The Fund may
enter into such repurchase agreements with banks, broker/dealers, and other
financial institutions pursuant to procedures approved by the Fund's Directors.
These transactions must be fully collateralized at all times, but involve some
risk to the Fund should the other party default on its obligations and the Fund
is delayed or prevented from recovering the collateral.
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<PAGE>
OTHER INFORMATION
Changes in Policies. The investment policies in this prospectus are not
fundamental, and the Fund's Board of Directors may change such policies without
shareholder approval. As a matter of policy, the Board of Directors would not
change the Fund's investment objective without shareholder approval.
Portfolio Turnover. The length of time the Fund has held a particular
security is not generally a consideration in investment decisions. A change in
the securities held by the Fund is known as "portfolio turnover." Portfolio
turnover generally involves some expense to the Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such sales may result in
realization of taxable capital gains by investors.
Securities Ratings. When securities are rated by one or more independent
rating agencies, the Fund uses these ratings to determine credit quality. In
cases where a security is rated in conflicting categories by different rating
agencies, the Fund may choose to follow the higher rating. The Fund will not
necessarily dispose of a security when its rating is reduced below its rating at
the time of purchase, although Mentor Advisors will monitor the investment to
determine whether continued investment in the security is consistent with the
Fund's investment objective.
Temporary Defensive Investing. During unusual market conditions, the Fund
may place up to 100% of its total assets in cash or high-quality, short-term
debt securities. To the extent that the Fund does this, it may not be pursuing
its objective.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial results for a single Fund share. The total returns in the
tables represent the rate that an investor would have earned or lost on an
investment in a Fund (assuming reinvestment of all dividends and distributions).
This information has been audited by audited by KPMG Peat Marwick LLP for each
of the Fund's fiscal years in the two year period ended December 31, 1998, and
by Deloitte & Touche LLP for each of the fiscal years in the three year period
ended December 31, 1996. KPMG Peat Marwick LLP's report and the Fund's financial
statements are included in the Fund's annual report, which is available upon
request.
[Financial Highlights to be added by Amendment]
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<PAGE>
[Back Cover]
AMERICA'S UTILITY FUND
901 East Byrd Street, Richmond, Virginia 23219
(800) 487-3863
The Fund's statement of additional information (SAI) and annual and
semi-annual reports to shareholders include additional information about the
Fund. The SAI and the financial statements include in the Fund's most recent
annual report to shareholders are incorporated by reference into this
prospectus, which means they are part of this prospectus for legal purposes. The
Fund's annual report discusses the market conditions and investment strategies
that significantly affected its performance during its last fiscal year. You may
obtain free copies of these materials, request other information about the Fund,
or make shareholder inquiries by calling Mentor Services Company at
1-800-487-3863.
You may review and copy information about the Fund, including its SAI, at
the Securities and Exchange Commission's public reference room in Washington,
D.C. You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Fund on the Commission's Internet site at
http://www.sec.gov. You may obtain copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Fund's file number
under the Investment Company Act, which is 811-6549.
<PAGE>
AMERICA'S UTILITY FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
May 3, 1999
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of America's Utility Fund, Inc. dated
May 3, 1999, as revised from time to time. Certain disclosure has been
incorporated by reference from the Fund's Annual Report. A free copy of both the
Prospectus and the Annual Report may be obtained by writing Mentor Services
Company, Inc., 901 East Byrd Street, P.O. Box 26501, Richmond, Virginia
23261-6501, or by calling 1-800-487-3863.
TABLE OF CONTENTS
Page
FUND HISTORY AND CLASSIFICATION.............................................B-2
INVESTMENT RESTRICTIONS.....................................................B-2
CERTAIN INVESTMENT TECHNIQUES...............................................B-4
MANAGEMENT OF THE FUND.....................................................B-10
CONTROL PERSONS AND PRINCIPAL HOLDERS......................................B-14
INVESTMENT ADVISORY SERVICES...............................................B-14
OTHER SERVICES.............................................................B-16
BROKERAGE..................................................................B-18
DETERMINATION OF NET ASSET VALUE...........................................B-20
TAX STATUS.................................................................B-22
DISTRIBUTION ..............................................................B-24
PERFORMANCE INFORMATION....................................................B-24
MEMBERS OF INVESTMENT TEAMS AT MENTOR ADVISORS.............................B-29
CUSTODIAN..................................................................B-31
INDEPENDENT AUDITORS.......................................................B-31
RATINGS ..................................................................B-31
FINANCIAL STATEMENTS.......................................................B-35
B-1
<PAGE>
FUND HISTORY AND CLASSIFICATION
America's Utility Fund, Inc. (the "Fund") was organized on January 28,
1992 as a Maryland corporation, and is registered as a diversified, open-end,
management investment company.
INVESTMENT RESTRICTIONS
The following are fundamental investment restrictions, which may not be
changed without approval by the holders of a majority of the outstanding shares
of the Fund. The Fund will not:
1. Purchase any security (other than obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities, for temporary investment) if as a result
more than 5% of the Fund's total assets are invested in the
securities of any one issuer; the Fund will concentrate its
investments (more than 25% of its assets) in securities issued
by utility companies.
2. Purchase any security if as a result the Fund would
then hold more than 10% of any class of securities of an
issuer (taking all common stock issues as a single class, all
preferred stock issues as a single class and all debt issues
as a single class) or more than 10% of the outstanding voting
securities of any one issuer.
3. Borrow money or securities for any purpose except to
the extent that borrowing up to 10% of the Fund's total assets
is permitted for emergency purposes. (Any such borrowings will
be made on a temporary basis from banks and will not be made
for investment purposes.) Money borrowed will be repaid before
additional portfolio securities are purchased.
4. Invest in securities of any issuer if, to the knowledge
of the Fund, any officer or director of the Fund or of the
Manager owns more than 1/2 of 1% of the outstanding securities
of such issuer, and such officers and directors who own more
than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer.
5. Purchase securities for the purpose of exercising
control over the issuers thereof.
6. Underwrite securities of other issuers; provided, that
this policy shall not be construed to prevent or limit in any
manner the right of the Fund to purchase securities for
investment purposes.
B-2
<PAGE>
7. Make loans to other persons other than (i) through the
purchase of a portion of an issue of publicly distributed debt
securities which are not considered loans, (ii) through the
purchase of bonds, debentures, commercial paper, corporate
notes and similar evidences of indebtedness of a type commonly
sold privately to financial institutions, or (iii) by entering
into repurchase agreements with respect to not more than 25%
of its total assets (taken at current value).
8. Buy securities on margin, or effect short sales of
securities. (Margin payments in connection with transactions
in futures contracts, options, forward contracts, and other
financial instruments are not considered to constitute the
purchase of securities on margin for this purpose.)
9. Issue senior securities other than as consistent with
borrowings permitted under 3 above.
10. Invest in the securities of other investment companies
except by purchases in the open market involving only
customary brokerage commissions and as a result of which not
more than 5% of its total assets (taken at current value)
would be invested in such securities, or except as part of a
merger, consolidation or other acquisition.
11. Own, buy or sell commodities or commodity contracts
(except that the Fund may purchase and sell foreign
currencies, foreign currency futures contracts and related
options), or real estate or interests in real estate;
provided, that the Fund may purchase and sell securities which
are secured by real estate and securities of companies which
invest or deal in real estate.
12. Invest in warrants unless acquired as a unit or
attached to other securities.
13. Invest in puts, calls, straddles, spreads, or any
combination thereof (except that the Fund may invest in
foreign currency futures and options transactions and forward
contracts).
14. Invest in limited partnerships or similar interests in
oil, gas and other mineral exploration development programs;
provided, that the Fund may invest in the securities of other
corporations whose activities include such exploration and
development.
15. Invest more than 5% of its total assets in any issuer
or issuers having a record of less than three years continuous
operation, which may include the operations of predecessor
companies.
B-3
<PAGE>
16. Purchase any security restricted as to disposition
under federal securities laws.
The Investment Company Act of 1940, as amended (the "1940 Act"),
provides that the approval of a majority of the outstanding shares of the Fund
means the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund and (2) 67% or more of the shares present at a meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy.
All percentage limitations on investments will apply at the time of the
making of an investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of such
investment.
It is also a policy of the Fund, which may be changed without
shareholder approval, not to purchase any voting security of any electric or gas
utility company (as defined by the Public Utility Holding Company Act of 1935)
if as a result the Fund would then hold 5% or more of the outstanding voting
securities of such company.
Although not a fundamental policy, the Fund will not invest in
securities which are not readily marketable. (Foreign currency forward
contracts, futures contracts, and options are not considered securities for this
purpose.)
CERTAIN INVESTMENT TECHNIQUES
Set forth below is information concerning certain investment techniques
in which the Fund may engage, and certain of the risks they may entail.
Repurchase Agreements
A repurchase agreement is a contract under which the Fund acquires a
security for a relatively short period (usually not more than one week) subject
to the obligation of the seller to repurchase and the Fund to resell such
security at a fixed time and price (representing the Fund's cost plus interest).
It is the Fund's present intention to enter into repurchase agreements only with
member banks of the Federal Reserve System and securities dealers meeting
certain criteria as to creditworthiness and financial condition established by
the Board of Directors and only with respect to obligations of the U.S.
government or its agencies or instrumentalities or other high quality short term
debt obligations. Repurchase agreements may also be viewed as loans made by the
Fund which are collateralized by the securities subject to repurchase. Mentor
Advisors will monitor such transactions to ensure that the value of the
underlying securities will be at least equal at all times to the total amount of
the repurchase obligation, including the interest factor. If the seller
defaults, the Fund could realize a loss on the sale of the underlying security
to the extent that the proceeds of sale including accrued interest are less than
the resale price provided
B-4
<PAGE>
in the agreement including interest. In addition, if the seller should be
involved in bankruptcy or insolvency proceedings, the Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest if the Fund is treated as an unsecured creditor and required to return
the underlying collateral to the seller's estate.
Foreign Securities
Investments in foreign securities may involve considerations different
from investments in domestic securities due to limited publicly available
information, non-uniform accounting standards, lower trading volume and possible
consequent illiquidity, greater volatility in price, the possible imposition of
withholding or confiscatory taxes, the possible adoption of foreign governmental
restrictions affecting the payment of principal and interest, expropriation of
assets, nationalization, or other adverse political or economic developments.
Foreign companies may not be subject to auditing and financial reporting
standards and requirements comparable to those which apply to U.S. companies.
Foreign brokerage commissions and other fees are generally higher than in the
United States. It may be more difficult to obtain and enforce a judgment against
a foreign issuer.
In addition, to the extent that the Fund's foreign investments are not
United States dollar-denominated, the Fund may be affected favorably or
unfavorably by changes in currency exchange rates; exchange control regulations;
foreign withholding taxes or restrictions or prohibitions on the repatriation of
foreign currencies and may incur costs in connection with conversion between
currencies.
Income received by the Fund from sources within foreign countries may
be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets to be invested in
various countries is not known, and tax laws and their interpretations may
change from time to time and may change without advance notice. Any such taxes
paid by the Fund will reduce its net income available for distribution to
stockholders.
Foreign Currency Transactions
The Fund may engage in currency exchange transactions to protect
against uncertainty in the level of future foreign currency exchange rates and
to increase current return. The Fund may engage in both "transaction hedging"
and "position hedging".
When it engages in transaction hedging, the Fund enters into foreign
currency transactions with respect to specific receivables or payables of the
Fund generally arising in connection with the purchase or sale of its portfolio
securities. The Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
B-5
<PAGE>
currency. By transaction hedging the Fund will attempt to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
The Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with transaction hedging. The
Fund may also enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and purchase and sell foreign currency futures
contracts.
For transaction hedging purposes the Fund may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives the Fund the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the Fund the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives the Fund the right to assume a
long position in the futures contract until the expiration of the option. A call
option on currency gives the Fund the right to purchase a currency at the
exercise price until the expiration of the option.
When it engages in position hedging, the Fund enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which securities held by the Fund are denominated or are
quoted in their principle trading markets or an increase in the value of
currency for securities which the Fund expects to purchase. In connection with
position hedging, the Fund may buy or sell foreign currency futures contracts
and put and call options on foreign currencies and on foreign currency futures
contracts. The Fund may also purchase or sell foreign currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the values of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of the
Fund's portfolio securities at the expiration or maturity of a forward or
futures contract. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities of the Fund if the market value of such security or securities
exceeds the amount of foreign currency the Fund is obligated to deliver.
B-6
<PAGE>
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market.
Currency Forward and Futures Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a given
month. Forward contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
B-7
<PAGE>
Positions in foreign currency futures contracts and related options may
be closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although the Fund will normally purchase or
sell foreign currency futures contracts and related options only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and, in the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin on its futures positions.
Foreign Currency Options. Options on foreign currencies are traded
primarily in the over-the-counter market, although options on foreign currencies
have recently been listed on several exchanges. There can be no assurance that a
liquid secondary market will exist for a particular option at any specific time.
Options on foreign currencies are affected by all of those factors which
influence exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
To the extent that the U.S. options markets are closed while the
markets for the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be reflected in
the U.S. options markets.
Settlement Procedures. Settlement procedures relating to the Fund's
investments in foreign securities and to the Fund's foreign currency exchange
transactions may be more complex than settlements with respect to investments in
debt or equity securities of U.S. issuers, and may involve certain risks not
present in the Fund's domestic investments. For example, settlement of
transactions involving foreign securities or foreign currency may occur within a
foreign country, and the Fund may be required to accept or make delivery of the
underlying securities or currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be required to pay any fees, taxes
or charges associated with such delivery. Such investments may also involve the
risk that an entity involved in the settlement may not meet its obligations.
Foreign Currency Conversion. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign
B-8
<PAGE>
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
Temporary Defensive Position. During unusual market conditions, the
Fund may place almost 100% of its total assets in cash or high quality,
short-term debt securities.
Portfolio Turnover. [During its most recent past two fiscal years, the
Fund has not experienced any significant variation in its portfolio turnover
rates].
B-9
<PAGE>
MANAGEMENT OF THE FUND
The Directors are responsible for generally overseeing the Fund's
business.
Officers and Directors
The Directors and officers of the Fund are as follows. Unless otherwise
noted, the address of each officer and director is 901 East Byrd Street,
Richmond, Virginia 23219.
<TABLE>
<CAPTION>
POSITION HELD
NAME AND ADDRESS WITH A FUND PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- ------------------------------ -------------- ----------------------------------------------------------------------------------
<S> <C> <C>
Daniel J. Ludeman (41)* Chairman Chairman and Chief Executive Officer Mentor Investment
c/o Mentor Funds and Director Group, Inc.; Chairman and Director Mentor Income Fund,
901 E. Byrd Street Inc.; Chairman and Trustee, Cash Resource Trust,
Richmond, VA 23219 Mentor Variable Investment Portfolios, Mentor Funds
and Mentor Institutional Trust.
Arnold H. Dreyfuss (70) Director Chairman, Eskimo Pie Corporation; Trustee, Cash Resource
P.O. Box 18156 Trust, Mentor Variable Investment Portfolios, Mentor Funds and Mentor
Richmond, Virginia 23226 Institutional Trust; Director, Mentor Income Fund, Inc.;
formerly, Chairman and Chief Executive Officer, Hamilton Beach/Proctor-Silex, Inc.
Thomas F. Keller (67) Director R.J. Reynolds Industries Professor of Business Adminis-
Fuqua School of Business tration and Former Dean of Fuqua School of Business, Duke
Duke University University; Director of LADD Furniture, Inc., Wendy's
Durham, NC 27706 International, Inc., American Business Products, Inc., Dimon,
Inc., and Biogen, Inc.; Director of Nations Balanced Target
Maturity Fund, Inc., Nations Government Income Term Trust
2003, Inc., Nations Government Income Term Trust 2004,
Inc., Hatteras Income Securities, Inc., Nations Institutional
Reserves, Nations Fund Trust, Nations Fund, Inc., Nations
Fund Portfolios, Inc., and Nations LifeGoal Funds, Inc.
Trustee, Cash Resource Trust, Mentor Variable Investment
Portfolios, Mentor Funds and Mentor Institutional Trust; Director, Mentor
Income Fund, Inc.
Louis W. Moelchert, Jr. (57) Director Vice President for Investments, University of Richmond;
University of Richmond Trustee, Cash Resource Trust, Mentor Variable Investment
Richmond, VA 23173 Portfolios, Mentor Funds and Mentor Institutional Trust; Director, Mentor
Income Fund, Inc.
Troy A. Peery, Jr. (52) Director Trustee, Cash Resource Trust, Mentor Variable Investment
c/o Mentor Funds Portfolios, Mentor Funds and Mentor Institutional Trust; Director, Mentor
901 E. Byrd Street Income Fund, Inc. Formerly, President of Heilig-Meyers Company.
Richmond, VA 23219
</TABLE>
B-10
<PAGE>
<TABLE>
<CAPTION>
POSITION HELD
NAME AND ADDRESS WITH A FUND PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- --------------------------- -------------- -------------------------------------------------------------------------------------
<S> <C> <C>
Peter J. Quinn, Jr. (38)* Director Managing Director, Mentor Investment Group, LLC, and
c/o Mentor Funds Mentor Services Company, Inc.; Trustee, Cash Resource
901 E. Byrd Street Trust, Mentor Variable Investment Portfolios, Mentor Funds and Mentor
Richmond, VA 23219 Institutional Trust; Director, Mentor Income Fund, Inc.
Arch T. Allen, III (58) Director Attorney at law, Raleigh, North Carolina; Trustee, Cash
c/o Mentor Funds Resource Trust, Mentor Variable Investment Portfolios, Mentor Funds and
901 E. Byrd Street Mentor Institutional Trust; Director, Mentor Income Fund,
Richmond, VA 23219 Inc.; formerly, Vice Chancellor for Development and University Relations,
University of North Carolina at Chapel Hill.
Weston E. Edwards (64) Director President, Weston Edwards & Associates; Trustee, Cash
c/o Mentor Funds Resource Trust, Mentor Variable Investment Portfolios, Mentor Funds and
901 E. Byrd Street Mentor Institutional Trust; Director, Mentor Income Fund,
Richmond, VA 23219 Inc.; Founder and Chairman, The Housing
Roundtable; formerly, President, Smart Mortgage Access, Inc.
Jerry R. Barrentine (64) Director President, J.R. Barretine & Associates; Trustee, Cash
c/o Mentor Funds Resource Trust, Mentor Variable Investment Portfolios, Mentor Funds and
901 E. Byrd Street Mentor Institutional Trust; Director, Mentor Income Fund,
Richmond, VA 23219 Inc.; formerly, Executive Vice President and Chief Financial Officer,
Barclays/American Mortgage Director Corporation; Managing Partner, Barrentine
Lott & Associates.
J. Garnett Nelson (59) Director Consultant, Mid-Atlantic Holdings, LLC; Trustee, Cash
c/o Mentor Funds Resource Trust, Mentor Variable Investment Portfolios, Mentor Funds and
901 E. Byrd Street Mentor Institutional Trust; Director, Mentor Income Fund,
Richmond, VA 23219 Inc., GE Investment Funds, Inc., and Lawyers Title Corporation; Member,
Investment Advisory Committee, Virginia Retirement System; formerly,
Senior Vice President, The Life Insurance Company of Virginia.
Paul F. Costello (38) President Managing Director, Mentor Investment Group, LLC;
c/o Mentor Funds President, Cash Resource Trust, Mentor Income Fund, Inc.,
901 E. Byrd Street Mentor Institutional Trust, Mentor Variable Investment
Richmond, VA 23219 Portfolios and Mentor Funds; Director, Mentor Perpetual
Advisors, LLC.
</TABLE>
B-11
<PAGE>
<TABLE>
<CAPTION>
POSITION HELD
NAME AND ADDRESS WITH A FUND PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- ----------------------- -------------- -----------------------------------------------------------------------------------------
<S> <C> <C>
Terry L. Perkins (51) Treasurer, Senior Vice President and Treasurer, Mentor Investment
c/o Mentor Funds Secretary Group, LLC; Treasurer, Mentor Institutional Trust, Cash
901 E. Byrd Street Resource Trust, Mentor Variable Investment Portfolios, Mentor Funds, and
Richmond, VA 23219 Mentor Income Fund, Inc.
Michael Wade (32) Assistant Vice President and Controller, Mentor Investment Group,
c/o Mentor Funds Treasurer LLC Assistant Treasurer, Mentor Income Fund, Inc., Cash
901 E. Byrd Street Resource Trust, Mentor Institutional Trust, Mentor Variable
Richmond, VA 23219 Investment Portfolios and Mentor Funds.
</TABLE>
B-12
<PAGE>
Director Compensation
The table below shows the fees paid to each current Director by the
Fund for its 1998 fiscal year, and for the Mentor Family of Funds for the 1998
calendar year.
Total compensation
Aggregate Compensation from all
Trustees from the Fund complex funds (29 Funds)
- --------- ----------------------- ------------------------
Daniel J. Ludeman $ $ 0
Arnold H. Dreyfuss+ $ $32,000
Thomas F. Keller+ $ $32,000
Louis W. Moelchert, Jr. $ $32,000
Troy A. Peery, Jr.+ $ $40,000
Peter J. Quinn, Jr.+ $ $32,000
Arch T. Allen, III+ $ $ 0
Weston E. Edwards+ $ $40,000
Jerry R. Barrentine+ $ $42,000
J. Garnett Nelson+ $ $35,000
- --------------
+ Elected as a Director December 22, 1997
The Directors do not receive pension or retirement benefits from the
Fund.
The Articles of Incorporation of the Fund provide that the Fund will
indemnify its Directors and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Fund, except if it is determined in the manner specified in the
Articles of Incorporation that they have not acted in good faith in the
reasonable belief that their actions were in the best interests of the Fund or
that such indemnification would relieve any officer or Director of any liability
to the Fund or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of his or her duties. The Fund, at its
expense, provides liability insurance for the benefit of its Directors and
officers.
B-13
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS
[The Directors and officers as a group owned less than 1% of the
outstanding shares of common stock of the Fund as of April 15, 1999. To the
knowledge of the Fund, as of April 15, 1999 no person owned of record or
beneficially more than 5% of the outstanding shares of common stock of the Fund
as of such date.]
INVESTMENT ADVISORY SERVICES
Investment decisions for the Fund and for the other investment advisory
clients of Mentor Advisors and its affiliates are made with a view to achieving
their respective investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular client
involved. Thus, a particular security may be bought or sold for certain clients
even though it could have been bought or sold for other clients at the same
time. Likewise, a particular security may be bought for one or more clients when
one or more other clients are selling the security. In some instances, one
client may sell a particular security to another client. It also sometimes
happens that two or more clients simultaneously purchase or sell the same
security, in which event each day's transactions in such security are, insofar
as possible, averaged as to price and allocated between such clients in a manner
which in Mentor Advisors' opinion is equitable to each and in accordance with
the amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients. Mentor Advisors employs a professional staff of
investment personnel who draw upon a variety of resources for research
information for the Fund.
Expenses incurred in the operation of the Fund, including but not
limited to taxes, interest, brokerage fees and commissions, SEC fees and related
expenses, state Blue Sky qualification fees, charges of the custodian and
transfer and dividend disbursing agents, outside auditing, accounting, and legal
services, investor servicing fees and expenses, charges for the printing of
prospectuses and statements of additional information for regulatory purposes or
for distribution to shareholders, certain shareholder report charges, and
charges relating to corporate matters are borne by the Fund.
The Management Contract is subject to annual approval (beginning in
2000) by (i) the Board of Directors or (ii) vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Fund, provided that in
either event the continuance is also approved by a majority of the Directors who
are not "interested persons" (as defined in the 1940 Act) of the Fund or Mentor
Advisors by vote cast in person at a meeting called for the purpose of voting on
such approval. The Management Contract is terminable without penalty, on not
more than sixty days' notice by the Fund or Mentor Advisors.
B-14
<PAGE>
Management Fees
Under the Management Contract, the Fund pays a monthly management fee,
calculated daily, to Mentor Advisors at the following rates, expressed as a
percentage of the Fund's average daily net assets: 0.75% of the first $5
million, 0.50% of the next $5 million, 0.25% of the next $90 million, 0.20% of
the next $100 million, 0.15% of the next $100 million, and 0.10% thereafter.
The Fund paid management fees in the following amounts for the fiscal
years indicated below:
1998 1997 1996
--------- -------- ---------
$401,554 $371,906 $352,144
B-15
<PAGE>
OTHER SERVICES
Administrative Services
Mentor Investment Group, LLC ("Mentor") acts as administrator to the
Fund pursuant to an Administrative Services Agreement. Pursuant to the
Administrative Services Agreement, Mentor assists the Fund in preparation of
certain reports to shareholders of the Fund, tax returns, and filings with the
SEC, prepares and furnishes reports to the Fund's Board of Directors, and
generally assists in the Fund's business operations.
The Administrative Services Agreement is subject to annual approval
(beginning in 2000) by the Board of Directors, provided that the continuance is
also approved by a majority of the Directors who are not "interested persons"
(as defined in the 1940 Act) of the Fund, or Mentor, by vote cast in person at a
meeting called for the purpose of voting on such approval. The Agreement is
terminable without penalty, immediately upon notice, by the Board of Directors
or by vote of the holders of a majority of the Fund shares, and on not less than
thirty days' notice by Mentor.
The Fund pays Mentor for such services at an annual rate of 0.65% of
the Fund's average daily net assets, less the amount of any management fees paid
to Mentor Advisors pursuant to the Management Contract.
Prior to August 21, 1995, America's Utility Fund Service Company ("AUF
Service Company") provided administrative services and certain shareholder and
transfer and dividend payment agent services to the Fund pursuant to an
Administrative Services and Transfer Agency Agreement. For these combined
services, AUF Service Company received fees from the Fund at the annual rate of
1% of the Fund's average daily net assets. AUF Service Company also paid the
management fee for the Fund.
Administrative Fees
The Fund paid the following fees for administrative services for the
fiscal years indicated below.
1998 1997 1996
--------- --------- ---------
$[ ] $596,068 $617,040
B-16
<PAGE>
Shareholder Servicing
The Fund has entered into a Shareholder Service Agreement dated
February 1, 1998 with Mentor, pursuant to which Mentor, by itself or through
other financial institutions, provides shareholder support services to the Fund
and its shareholders. These services may include, but are not limited to,
providing office space and various clerical, supervisory, and computer personnel
for the maintenance of shareholder accounts, processing purchase and redemption
transactions, and providing assistance to shareholders. In return for providing
these services, the Fund pays Mentor a fee, at the annual rate of 0.25% of the
Fund's average daily net assets. Prior to October 31, 1997, pursuant to a
Sub-Shareholder Services Agreement between Mentor and AUF Service Company,
Mentor paid fees to AUF Service Company at the same annual rate of the Fund's
net assets in respect of which AUF Service Company provided specified
shareholder services.
The Fund paid shareholder services fees to Mentor of [ ]
during fiscal year 1998.
Mentor (throughout the period from August 21, 1995 to December 31,
1998) paid the expenses of the Fund to the extent total Fund operating expenses
exceeded 1.21% of the Fund's average daily net assets. As a result of this
expense limitation, Mentor incurred expenses of $144,093, $124,524, and $[ ]
respectively, for the 1996, 1997 and 1998 fiscal years.
Transfer agent services
Prior to December 15, 1997, AUF Service Company received fees from
State Street Bank and Trust Company ("State Street"), the Fund's transfer agent,
for services performed under a Sub-Transfer Agency Agreement dated August 21,
1995. Pursuant to that Agreement, AUF Service Company provided certain transfer
agent, dividend disbursing agent, and other services to the Fund and its
shareholders who purchased shares of the Fund through facilities made available
to Virginia Power and North Carolina Power customers. State Street paid AUF
Service Company a fee at the annual rate of 0.10% of the Fund's average net
assets attributable to shares held such shareholders. For fiscal year 1997,
these fees amounted to $337,898.
Custody Arrangements
Pursuant to a Custody Agreement dated March 1, 1995, Investors
Fiduciary Trust Corporation ("IFTC"), serves as custodian to the Fund.
B-17
<PAGE>
BROKERAGE
Transactions on U.S. stock exchanges, commodities markets, and futures
markets and other agency transactions involve the payment by the Fund of
negotiated brokerage commissions. Such commissions vary among different brokers.
A particular broker may charge different commissions according to such factors
as the difficulty and size of the transaction. Transactions in foreign
investments often involve the payment of fixed brokerage commissions, which may
be higher than those in the United States. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the price paid by the Fund usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive brokerage and research services (as defined in the Securities
Exchange Act of 1934, as amended (the "1934 Act")), from broker-dealers that
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, Mentor Advisors receives brokerage and research services and other
similar services from many broker-dealers with which it places the Fund's
portfolio transactions and from third parties with which these broker-dealers
have arrangements. These services include such matters as general economic and
market reviews, industry and company reviews, evaluations of investments,
recommendations as to the purchase and sale of investments, newspapers,
magazines, pricing services, quotation services, news services and personal
computers utilized by Mentor Advisors' managers and analysts. Where the services
referred to above are not used exclusively by Mentor Advisors for research
purposes, Mentor Advisors, based upon its own allocations of expected use, bears
that portion of the cost of these services which directly relates to its
non-research use. Some of these services are of value to Mentor Advisors and its
affiliates in advising various of its clients (including the Fund), although not
all of these services are necessarily useful and of value in managing the
Fund. The management fee paid by the Fund Portfolio is not reduced because
Mentor Advisors or its affiliates receive these services even though Mentor
Advisors might otherwise be required to purchase some of these services for
cash.
Mentor Advisors places all orders for the purchase and sale of
portfolio investments for the Fund and buys and sells investments for the Fund
through a substantial number of brokers and dealers. Mentor Advisors seeks the
best overall terms available for the Fund, except to the extent it may be
permitted to pay higher brokerage commissions as described below. In doing so,
Mentor Advisors, having in mind the Fund's best interests, considers all factors
it deems relevant, including, by way of illustration, price, the size of the
transaction, the nature of the market for the security or other investment, the
amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial stability of
the broker-dealer involved, and the quality of service rendered by the
broker-dealer in other transactions.
B-18
<PAGE>
As permitted by Section 28(e) of the 1934 Act, and by the Management
Contract, the Mentor Advisors may cause the Fund to pay a broker-dealer which
provides "brokerage and research services" (as defined in the 1934 Act) to
Mentor Advisors an amount of disclosed commission for effecting securities
transactions on stock exchanges and other transactions for the Fund on an agency
basis in excess of the commission which another broker-dealer would have charged
for effecting that transaction. Mentor Advisors' authority to cause the Fund to
pay any such greater commissions is also subject to such policies as the Board
of Directors may adopt from time to time. Mentor Advisors does not currently
intend to cause the Fund to make such payments. It is the position of the staff
of the Securities and Exchange Commission that Section 28(e) does not apply to
the payment of such greater commissions in "principal" transactions.
Accordingly, Mentor Advisors will use its best efforts to obtain the best
overall terms available with respect to such transactions, as described above.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to such other policies as the Board of
Directors may determine, Mentor Advisors may consider sales of shares of the
Fund as a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund.
The Directors have determined that portfolio transactions for the Fund may
be effected through Wheat, First Securities, Inc. ("Wheat"), First Union
Brokerage Services ("FUBS"), and EVEREN Securities, Inc. ("EVEREN"),
broker-dealers affiliated with Mentor Advisors. The Directors have adopted
certain policies incorporating the standards of Rule 17e-l issued by the SEC
under the 1940 Act which requires, among other things, that the commissions paid
to Wheat, FUBS, and EVEREN must be reasonable and fair compared to the
commissions, fees, or other remuneration received by other brokers in connection
with comparable transactions involving similar securities during a comparable
period of time. Wheat, FUBS, and EVEREN will not participate in brokerage
commissions given by the Fund to other brokers or dealers. Over-the-counter
purchases and sales are transacted directly with principal market makers except
in those cases in which better prices and executions may be obtained elsewhere.
The Fund will in no event effect principal transactions with Wheat, FUBS, and
EVEREN in over-the-counter securities in which Wheat, FUBS, or EVEREN makes a
market.
Under rules adopted by the SEC, Wheat, FUBS, and EVEREN may not execute
transactions for the Fund on the floor of any national securities exchange, but
may effect transactions for the Fund by transmitting orders for execution and
arranging for the performance of this function by members of the exchange not
associated with them. Wheat, FUBS, and EVEREN will be required to pay fees
charged to those persons performing the floor brokerage elements out of the
brokerage compensation they receive from the Fund.
B-19
<PAGE>
Brokerage Commissions
The Fund paid brokerage commissions in the following amounts during the
periods set forth below:
Fiscal year Fiscal year Fiscal year
1996 1997 1998
------------ ----------- ------------
$102,955 $161,766 $
The following table shows brokerage commissions paid by the Fund to
affiliated brokers for the periods indicated:
Fiscal year Fiscal year Fiscal year
1996 1997 1998
------------ ----------- ------------
Wheat First Securities, Inc. $39,946 $41,440 $
EVEREN Securities, Inc. $ 3,360(2) $18,544 $
FUBS N/A N/A $
- -----------------
(2) For the period November, 1996 through December 31, 1996.
For fiscal 1996 the brokerage commissions shown above paid to Wheat
amounted to 38.8% of the Fund's aggregate brokerage commissions on 11.45% of the
Fund's aggregate dollar amount of brokerage transactions. For fiscal 1996 the
brokerage commissions shown above paid to EVEREN amounted to 3.26% of the Fund's
aggregate brokerage commissions on 0.71% of the Fund's aggregate dollar amount
of brokerage transactions. For fiscal 1997 the brokerage commissions shown above
paid to Wheat amounted to 25.62% of the Fund's aggregate brokerage commissions
on 22.39% of the Fund's aggregate dollar amount of brokerage transaction. For
fiscal 1997 the brokerage commissions shown above paid to EVEREN amounted to
11.46% of the Fund's aggregate brokerage commissions on 11.32% of the Fund's
aggregate dollar amount of brokerage transactions. For fiscal 1998 the brokerage
commissions shown above paid to Wheat amounted to % of the Fund's aggregate
brokerage commissions on % of the Fund's aggregate dollar amount of
brokerage transaction. For fiscal 1998 the brokerage commissions shown above
paid to EVEREN amounted to % of the Fund's aggregate brokerage commissions
on % of the Fund's aggregate dollar amount of brokerage transactions.
DETERMINATION OF NET ASSET VALUE
The Fund determines its net asset value per share each day the New York
Stock Exchange (the "Exchange") is open.
B-20
<PAGE>
Securities for which market quotations are readily available are
valued at prices which, in the opinion of the Board of Directors or Mentor
Advisors, most nearly represent the market values of such securities. Currently,
such prices are determined using the last reported sale price or, if no sales
are reported (as in the case of some securities traded over-the-counter), the
last reported bid price, except that certain U.S. Government securities are
stated at the mean between the last reported bid and asked prices. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value. All other securities and assets
are valued at their fair value following procedures approved by the Board of
Directors. Liabilities are deducted from the total, and the resulting amount is
divided by the number of shares of the Fund outstanding.
Reliable market quotations are not considered to be readily available
for long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities, or certain foreign securities. These investments are stated at fair
value on the basis of valuations furnished by pricing services, which determine
valuations for normal, institutional-size trading units of such securities using
methods based on market transactions for comparable securities and various
relationships between securities which are generally recognized by institutional
traders.
If any securities held by the Fund are restricted as to resale, Mentor
Advisors determines their fair values. The fair value of such securities is
generally determined as the amount which the Fund could reasonably expect to
realize from an orderly disposition of such securities over a reasonable period
of time. The valuation procedures applied in any specific instance are likely to
vary from case to case. However, consideration is generally given to the
financial position of the issuer and other fundamental analytical data relating
to the investment and to the nature of the restrictions on disposition of the
securities (including any registration expenses that might be borne by the Fund
in connection with such disposition). In addition, specific factors are also
generally considered, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any available
analysts' reports regarding the issuer.
In the case of certain fixed-income securities, including certain less
common mortgage-backed securities, market quotations are not readily available
to the Fund on a daily basis, and pricing services may not provide price
quotations. In such cases, Mentor Advisors is typically able to obtain dealer
quotations for each of the securities on at least a weekly basis. On any day
when it is not practicable for Mentor Advisors to obtain an actual dealer
quotation for a security, Mentor Advisors may reprice the securities based on
changes in the value of a U.S. Treasury security of comparable duration. When
the next dealer quotation is obtained, Mentor Advisors compares the dealer quote
against the price obtained by it using its U.S. Treasuryspread calculation, and
makes any necessary adjustments to its calculation methodology. Mentor Advisors
attempts to obtain dealer quotes for each security at least weekly, and on any
day when there has been an unusual occurrence affecting the securities which, in
Mentor
B-21
<PAGE>
Advisors' view, makes pricing the securities on the basis of U.S. Treasuries
unlikely to provide a fair value of the securities.
Generally, trading in certain securities (such as foreign securities)
is substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Fund's shares are computed as of such times. Also, because of the amount
of time required to collect and process trading information as to large numbers
of securities issues, the values of certain securities (such as convertible
bonds, U.S. Government securities, and tax-exempt securities) are determined
based on market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange. Occasionally, events
affecting the value of such securities may occur between such times and the
close of the Exchange which will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
their fair value following procedures approved by the Board of Directors.
TAX STATUS
The Fund intends to qualify each year and elect to be taxed as a
regulated investment company under Subchapter M of the United States Internal
Revenue Code of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, the Fund will not be subject to federal income
tax on any of its net investment income or net realized capital gains that are
distributed to shareholders.
In order to qualify as a "regulated investment company," the Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other dispositions of stock, securities, or foreign currencies, and other income
(including gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies
and (b) diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government Securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any issuer (other than U.S. Government Securities). In order to
receive the favorable tax treatment accorded regulated investment companies and
their shareholders, moreover, the Fund must in general distribute with respect
to each taxable year at least 90% of the sum of its taxable net investment
income, its net tax-exempt income, and the excess, if any, of net short-term
capital gains over net long-term capital losses for such year.
B-22
<PAGE>
An excise tax at the rate of 4% will be imposed on the excess, if any,
of the Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund so elects) plus undistributed amounts from prior years. Each Portfolio
intends to make distributions sufficient to avoid imposition of the excise tax.
Distributions declared by the Fund during October, November, or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which declared.
The Fund is required to withhold 31% of all income dividends and
capital gain distributions, and 31% of the gross proceeds of all redemptions of
Fund shares, in the case of any shareholder who does not provide a correct
taxpayer identification number, about whom the Fund is notified that the
shareholder has under reported income in the past, or who fails to certify to
the Fund that the shareholder is not subject to such withholding. Tax-exempt
shareholders are not subject to these back-up withholding rules so long as they
furnish the Fund with a proper certification.
Foreign currency-denominated securities and related hedging
transactions. The Fund's transactions in foreign currencies, foreign
currency-denominated debt securities, and certain foreign currency options,
futures contracts, and forward contracts (and similar instruments) may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
If more than 50% of the Fund's assets at year end consists of stock or
securities of foreign corporations, the Fund may elect to permit shareholders to
claim a credit or deduction on their income tax returns for their pro rata
portion of qualified taxes paid by the Fund to foreign countries. In such a
case, shareholders will include in gross income from foreign sources their pro
rata shares of such taxes. A shareholder's ability to claim a foreign tax credit
or deduction in respect of foreign taxes paid by the Fund may be subject to
certain limitations imposed by the Code (including, with respect to a foreign
tax credit, a holding period requirement imposed pursuant to the Tax payer
Relief Act of 1997), as a result of which a shareholder may not get a full
credit or deduction for the amount of such taxes. Shareholders who do not
itemize on their federal income tax returns may claim a credit (but no
deduction) for such foreign taxes.
Investment by the Fund in certain "passive foreign investment
companies" could subject the Fund to a U.S. federal income tax or other charge
on the proceeds from the sale of its investment in such a company; however, this
tax can be avoided by making an election to mark such investments to market
annually or to treat the passive foreign investment company as a "qualified
electing fund."
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should
B-23
<PAGE>
be made to the pertinent Code sections and regulations. The Code and regulations
are subject to change by legislative or administrative actions. Dividends and
distributions also may be subject to foreign, state and federal taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, foreign, state or local taxes. The foregoing discussion
relates solely to U.S. federal income tax law. Non-U.S. investors should consult
their tax advisers concerning the tax consequences of ownership of shares of the
Fund, including the possibility that they could be subject to the backup
withholding rules described above or that distributions may be subject to a 30%
United States withholding tax (or a reduced rate of withholding provided by
treaty).
DISTRIBUTION
Mentor Distributors, LLC ("Mentor Distributors") serves as principal
distributor of the Fund under a Distribution Agreement dated February 1, 1998.
Pursuant to the Distribution Agreement, Mentor Distributors agrees to bear the
expenses of printing any promotional or sales literature used by Mentor
Distributors or furnished by Mentor Distributors to dealers in connection with
the public offering of the Fund's shares, including expenses of advertising in
connection with such public offerings. Mentor Distributors has not undertaken to
sell any specified number of shares of the Fund.
The Fund or Mentor Distributors may terminate the Distribution
Agreement on sixty days' written notice without penalty. The Distribution
Agreement will terminate automatically in the event of its assignment.
PERFORMANCE INFORMATION
Total return for the one-, five-, and ten-year periods (or for the life
of the Fund, if shorter) is determined by calculating the actual dollar amount
of investment return on a $1,000 investment in the Fund at the beginning of the
period, and then calculating the annual compounded rate of return which would
produce that amount. Total return for a period of one year is equal to the
actual return of the Fund during that period. Total return calculations assume
reinvestment of all Fund distributions at net asset value per share on their
respective reinvestment dates. The total return for the one-year period ending
December 31, 1998 and the average annual total return for the life of the Fund
(May 5, 1992 through December 31, 1998) were [ ]% and [ ]%, respectively.
The Fund's yield is presented for a specified thirty-day period (the
"base period"). Yield is based on the amount determined by (i) calculating the
aggregate amount of dividends and interest earned by the Fund during the base
period less expenses accrued for that period, and (ii) dividing that amount by
the product of (A) the average daily number of shares of the Fund outstanding
during the base period and entitled to receive dividends and (B) the net asset
value per share on the last day of the base period. The result is annualized on
a compounding basis to determine the yield. For this calculation, interest
earned on debt obligations held by
B-24
<PAGE>
the Fund is generally calculated using the yield to maturity (or first expected
call date) of such obligations based on their market values (or, in the case of
receivables-backed securities such as GNMA's, based on cost). Dividends on
equity securities are accrued daily at their stated dividend rates. The yield
for the Fund for the thirty-day period ended December 31, 1998 was [ ]%.
All data for the Fund are based on past performance and do not predict
future results.
Independent statistical agencies measure the Fund's investment
performance and publish comparative information showing how the Fund, and other
investment companies, performed in specified time periods. Agencies whose
reports are commonly used for such comparisons are set forth below. From time to
time, the Fund may distribute these comparisons to its shareholders or to
potential investors. The agencies listed below measure performance based on the
basis of their own criteria rather than on the basis of the standardized
performance measures described above.
Lipper Analytical Services, Inc. distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated
by Lipper, reflecting generally changes in net asset value adjusted for
reinvestment of capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a variety of
performance periods, for example year-to-date, 1-year, 5-year, and
10-year performance. Lipper classifies mutual funds by investment
objective and asset category.
Morningstar, Inc. distributes mutual fund ratings twice a month. the
ratings are divided into five groups: highest, above average, neutral,
below average and lowest. They represent a fund's historical
risk/reward ratio relative to other funds with similar objectives. The
performance factor is a weighted-average assessment of the Portfolio's
3-year, 5-year, and 10-year total return performance (if available)
reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of
the fund. The ratings are derived from a purely quantitative system
that does not utilize the subjective criteria customarily employed by
rating agencies such as Standard & Poor's Corporation and Moody's
Investor Service, Inc.
Weisenberger's Management Results publishes mutual fund rankings and is
distributed monthly. The rankings are based entirely on total return
calculated by Weisenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year performance. Mutual funds are ranked in
general categories (e.g., international bond, international equity,
municipal bond, and maximum capital gain). Weisenberger rankings do not
reflect deduction of sales charges or fees.
Independent publications may also evaluate the Fund's performance.
certain of those publications are listed below. The Fund may
distribute evaluations by or excerpts from these
B-25
<PAGE>
publications to its shareholders or to potential investors. The
following illustrates the types of information provided by these
publications.
Business Week publishes mutual fund rankings in its Investment Figures
of the Week column. The rankings are based on 4-week and 52-week total
return reflecting changes in net asset value and the reinvestment of
all distributions. They do not reflect deduction of any sales charges.
Portfolios are not categorized; they compete in a large universe of
over 2,000 funds. The source for rankings is data generated by
Morningstar, Inc.
Investor's Business Daily publishes mutual fund rankings on a daily
basis. The rankings are depicted as the top 25 funds in a given
category. The categories are based loosely on the type of fund, e.g.,
growth funds, balanced funds, U.S. government funds, GNMA funds, growth
and income funds, corporate bond funds, etc. Performance periods for
sector equity funds can vary from 4 weeks to 39 weeks; performance
periods for other fund groups vary from 1 year to 3 years. Total return
performance reflects changes in net asset value and reinvestment of
dividends and capital gains. The rankings are based strictly on total
return. They do not reflect deduction of any sales charges Performance
grades are conferred from A+ to E. An A+ rating means that the fund has
performed within the top 5% of a general universe of over 2000 funds;
an A rating denotes the top 10%; an A- is given to the top 15%, etc.
Barron's periodically publishes mutual fund rankings. The rankings are
based on total return performance provided by Lipper Analytical
Services. The Lipper total return data reflects changes in net asset
value and reinvestment of distributions, but does not reflect deduction
of any sales charges. The performance periods vary from short-term
intervals (current quarter or year-to-date, for example) to long-term
periods (five-year or ten-year performance, for example). Barron's
classifies the funds using the Lipper mutual fund categories, such as
Capital Appreciation Portfolios, Growth Portfolios, U.S. Government
Portfolios, Equity Income Portfolios, Global Portfolios, etc.
Occasionally, Barron's modifies the Lipper information by ranking the
funds in asset classes. "Large funds" may be those with assets in
excess of $25 million; "small funds" may be those with less than $25
million in assets.
The Wall Street Journal publishes its Mutual Portfolio Scorecard on a
daily basis. Each Scorecard is a ranking of the top-15 funds in a given
Lipper Analytical Services category. Lipper provides the rankings based
on its total return data reflecting changes in net asset value and
reinvestment of distributions and not reflecting any sales charges. The
Scorecard portrays 4-week, year-to-date, one-year and 5-year
performance; however, the ranking is based on the one-year results. The
rankings for any given category appear approximately once per month.
Fortune magazine periodically publishes mutual fund rankings that have
been compiled for the magazine by Morningstar, Inc. Portfolios are
placed in stock or bond fund
B-26
<PAGE>
categories (for example, aggressive growth stock funds, growth stock
funds, small company stock funds, junk bond funds, Treasury bond funds
etc.), with the top-10 stock funds and the top-5 bond funds appearing
in the rankings. The rankings are based on 3- year annualized total
return reflecting changes in net asset value and reinvestment of
distributions and not reflecting sales charges. Performance is adjusted
using quantitative techniques to reflect the risk profile of the fund.
Money magazine periodically publishes mutual fund rankings on a
database of funds tracked for performance by Lipper Analytical
Services. The funds are placed in 23 stock or bond fund categories and
analyzed for five-year risk adjusted return. Total return reflects
changes in net asset value and reinvestment of all dividends and
capital gains distributions and does not reflect deduction of any sales
charges. Grades are conferred (from A to E): the top 20% in each
category receive an A, the next 20% a B, etc. To be ranked, a fund must
be at least one year old, accept a minimum investment of $25,000 or
less and have had assets of at least $25 million as of a given date.
Financial World publishes its monthly Independent Appraisals of Mutual
Portfolios, a survey of approximately 1000 mutual funds. Portfolios are
categorized as to type, e.g., balanced funds, corporate bond funds,
global bond funds, growth and income funds, U.S. government bond funds,
etc. To compete, funds must be over one year old, have over $1 million
in assets, require a maximum of $10,000 initial investment, and should
be available in at least 10 states in the United States. The funds
receive a composite past performance rating, which weighs the
intermediate - and long-term past performance of each fund versus its
category, as well as taking into account its risk, reward to risk, and
fees. An A+ rated fund is one of the best, while a D- rated fund is one
of the worst. The source for Financial World rating is Schabacker
investment management in Rockville, Maryland.
Forbes magazine periodically publishes mutual fund ratings based on
performance over at least two bull and bear market cycles. The funds
are categorized by type, including stock and balanced funds, taxable
bond funds, municipal bond funds, etc. Data sources include Lipper
Analytical Services and CDA Investment Technologies. The ratings are
based strictly on performance at net asset value over the given cycles.
Portfolios performing in the top 5% receive an A+ rating; the top 15%
receive an A rating; and so on until the bottom 5% receive an F rating.
Each fund exhibits two ratings, one for performance in "up" markets and
another for performance in "down" markets.
Kiplinger's Personal Finance Magazine (formerly Changing Times),
periodically publishes rankings of mutual funds based on one-, three-
and five-year total return performance reflecting changes in net asset
value and reinvestment of dividends and capital gains and not
reflecting deduction of any sales charges. Portfolios are ranked by
tenths: a rank of 1 means that a fund was among the highest 10% in
total return for the period; a rank of 10 denotes the bottom 10%.
Portfolios compete in categories of similar
B-27
<PAGE>
funds -- aggressive growth funds, growth and income funds, sector
funds, corporate bond funds, global governmental bond funds,
mortgage-backed securities funds, etc. Kiplinger's also provides a
risk-adjusted grade in both rising and falling markets. Portfolios are
graded against others with the same objective. The average weekly total
return over two years is calculated. Performance is adjusted using
quantitative techniques to reflect the risk profile of the fund.
U.S. News and World Report periodically publishes mutual fund rankings
based on an overall performance index (OPI) devised by Kanon Bloch
Carre & Co., a Boston research firm. Over 2000 funds are tracked and
divided into 10 equity, taxable bond and tax-free bond categories.
Portfolios compete within the 10 groups and three broad categories. The
OPI is a number from 0-100 that measures the relative performance of
funds at least three years old over the last 1, 3, 5 and 10 years and
the last six bear markets. Total return reflects changes in net asset
value and the reinvestment of any dividends and capital gains
distributions and does not reflect deduction of any sales charges.
Results for the longer periods receive the most weight.
The 100 Best Mutual Portfolios You Can Buy (1992), authored by Gordon
K. Williamson. The author's list of funds is divided into 12 equity and
bond fund categories, and the 100 funds are determined by applying four
criteria. First, equity funds whose current management teams have been
in place for less than five years are eliminated. (The standard for
bond funds is three years.) Second, the author excludes any fund that
ranks in the bottom 20 percent of its category's risk level. Risk is
determined by analyzing how many months over the past three years the
fund has underperformed a bank CD or a U.S. Treasury bill. Third, a
fund must have demonstrated strong results for current three-year and
five-year performance. Fourth, the fund must either possess, in Mr.
Williamson's judgment, "excellent" risk-adjusted return or "superior"
return with low levels of risk. Each of the 100 funds is ranked in five
categories: total return, risk/volatility, management, current income
and expenses. The rankings follow a fivepoint system: zero designates
"poor"; one point means "fair"; two points denote "good"; three points
qualify as a "very good"; four points rank as "superior"; and five
points mean "excellent."
B-28
<PAGE>
MEMBERS OF INVESTMENT TEAMS AT MENTOR ADVISORS
The following persons are investment personnel of Mentor Advisors, as
indicated.
Large Capitalization Quality Equity Growth
John G. Davenport, CFA -- Managing Director, Chief Investment Officer Mr.
Davenport has twelve years of investment management experience. He joined the
Mentor organization after heading equity research for Lowe, Brockenbrough,
Tierney, & Tattersall. He earned his undergraduate business degree from the
University of Richmond and his graduate degree in business from the University
of Virginia.
Richard H. Skeppstrom II -- Vice President, Portfolio Manager
Mr. Skeppstrom has six years of investment management experience. He has earned
both his undergraduate degree and masters of business administration from the
University of Virginia.
Richard L. Rice, CFA -- Vice President, Portfolio Manager
Mr. Rice has twenty-four years' experience in the securities industry. Prior to
joining the Mentor organization in 1993, he was a partner in the equity
management software firm, Parata Analytics Research, which was acquired by the
Mentor organization. His previous responsibilities include director of Research
for Signet Asset Management, Senior Research Analyst for Capitoline Investment
Services, and research positions at First Atlanta Corp. and Southeast Banking.
He earned his undergraduate business degree from the University of Florida.
Active Fixed-Income
P. Michael Jones, CFA -- Managing Director, Chief Investment Officer
Mr. Jones has eleven years of investment management experience. Mr. Jones is
responsible for the design and implementation of the fixed-income group's
proprietary analytical system. He earned his undergraduate degree from the
College of William and Mary.
Steven C. Henderson -- Associate Vice President, Portfolio Manager
Mr. Henderson has seven years of investment management experience. He has an
undergraduate degree from the University of Richmond and a masters in business
administration from George Washington University.
Stephen R. McClelland -- Vice President, Portfolio Manager
Mr. McClelland has six years of investment management experience, all of which
have been with the Mentor organization. He is a Certified Public Accountant and
received his undergraduate degree in accounting from Iowa State University and
his graduate business degree from Virginia Commonwealth University.
B-29
<PAGE>
Keith Wantling
Mr. Wantling has five years of experience. Mr. Wantling performs analysis and
screening for credit sensitive private label mortgage-backed securities and
directs the firm's portfolio analysis effort. He holds his undergraduate degree
in accounting information systems from Virginia Polytechnic Institute.
Small-to-Medium Capitalization Equity Growth
Theodore W. Price, CFA -- Managing Director, Chief Investment Officer
Mr. Price has over thirty years of investment management experience, with over
twenty-three years' tenure at Charter Asset Management, the predecessor to
Mentor Advisors. He has managed Mentor Growth Portfolio since its inception. He
earned both his undergraduate degree and masters of business administration from
the University of Virginia.
Linda A. Ziglar, CFA -- Portfolio Manager
Ms. Ziglar has seventeen years of investment management experience. Ms. Ziglar
joined Charter Asset Management, the predecessor to Mentor Advisors, from
Federated Investors, where she managed $300 million in equity assets. She holds
an undergraduate degree from Randolph-Macon Woman's College where she graduated
summa cum laude. She also holds a graduate degree in business administration
from the University of Pittsburgh.
Jeffrey S. Drummond, CFA -- Vice President, Portfolio Manager
Mr. Drummond has eight years of investment management experience. Mr. Drummond
began his career as a portfolio analyst in the Investment Strategy Department at
Wheat First Butcher Singer, where he shared responsibility for directing $100
million in assets following the Strategic Sectors Portfolio. He received his
undergraduate degree in finance from the University of Richmond, where he
graduated cum laude.
Edward Rick IV
Mr. Rick has two years of investment management experience. He received his
undergraduate degree in finance from the University of Richmond, where he
graduated cum laude.
Tactical Asset Allocation
Don R. Hays -- Chief Investment Officer
Mr. Hays has over twenty-seven years of investment experience and is Director of
Investment Strategy for Wheat First Butcher Singer, Inc., a position he has held
since 1984. Mr. Hays began his career as an engineer with the Von Braun
rocket-development team in 1968. He is regarded as one of the country's leading
investment strategists and his market outlook is quoted regularly in the Wall
Street Journal, Investor's Business Daily, USA Today, and other major media. He
has been a guest on the PBS series Wall $treet Week with Louis Rukeyser and is
regularly featured by Dow Jones, Reuters and Bloomberg News Services.
B-30
<PAGE>
Asa W. Graves VII, CFA -- Portfolio Manager
Mr. Graves has five years of investment management experience and works closely
with Mr. Hays to develop the analytical framework used in managing the Mentor
Strategy Portfolio. He earned his undergraduate degree from the University of
Richmond.
William P. Ryder -- Research Analyst
Mr. Ryder joined Wheat First Butcher Singer in 1991 as a member of its
Investment Strategy Group, working as a research analyst on its growth and
growth and income model portfolios. In 1995 he became part of the team
responsible for managing the Mentor Strategy Portfolio. In that capacity he
focuses primarily on conducting economic analysis, industry group studies, and
asset allocation modeling. Mr. Ryder attended Virginia Commonwealth University
and has five years' investment experience.
CUSTODIAN
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri, 64105, acts as the custodian for the Fund's portfolio securities and
cash. In this capacity, it maintains certain financial and accounting books and
records pursuant to agreements with the Fund.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, located at 99 High Street, Boston, Massachusetts
02110, are the Fund's independent accountants, providing audit services, tax
return review and other tax consulting services and assistance and consultation
in connection with the review of various Securities and Exchange Commission
filings. Prior to the 1997 fiscal year, Deloitte & Touche L.L.P., 707 East Main
Street, Richmond, Virginia 23219, served as the Fund's independent accountants.
RATINGS
The rating services' descriptions of corporate bonds are:
Moody's Investors Service, Inc.:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated
B-31
<PAGE>
lower than the best bonds because margins of protection may not be as large as
in Aaa securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Standard & Poor's:
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
A-1 and Prime-1 Commercial Paper Ratings
The rating A-1 (including A-1+) is the highest commercial paper rating assigned
by S&P. Commercial paper rated A-1 by S&P has the following characteristics:
o liquidity ratios are adequate to meet cash requirements;
o long-term senior debt is rated "A" or better;
o the issuer has access to at least two additional channels of
borrowing;
B-32
<PAGE>
o basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances;
o typically, the issuer's industry is well established and the issuer
has a strong position within the industry; and
o the reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3. Issues rated A-1 that are
determined by S&P to have overwhelming safety characteristics are designated
A-1+.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
o evaluation of the management of the issuer;
o economic evaluation of the issuer's industry or industries and an
appraisal of speculative- type risks which may be inherent in certain
areas;
o evaluation of the issuer's products in relation to competition and
customer acceptance;
o liquidity;
o amount and quality of long-term debt;
o trend of earnings over a period of ten years;
o financial strength of parent company and the relationships which
exist with the issuer; and
o recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to
meet such obligations.
Note Ratings:
MIG1/VMIG1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG2/VMIG2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
B-33
<PAGE>
A-1 - This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
B-34
<PAGE>
FINANCIAL STATEMENTS
[to be added by amendment]
B-35
<PAGE>
AMERICA'S UTILITY FUND, INC.
PART C. OTHER INFORMATION
Item 23. Exhibits
b. Exhibits
(1) Articles of Incorporation. (b)
(2) By-laws. (b)
(3) Article V of the Articles of Incorporation filed
herewith, and Article I of the By-laws filed
herewith, set forth provisions related to shareholder
rights.
(4)
(A) Management Contract dated February 1, 1998. (b)
(B) Administrative Services Agreement dated February 1, 1998.(b)
(5) Distribution Agreement, dated as of February 1, 1998. (b)
(6) Not Applicable.
(7) Custody Agreement dated March 1, 1995 (a)
(8)
(A) Shareholder Service Agreement dated February 1, 1998. (b)
<PAGE>
(B) Transfer Agency and Services Agreement dated August 21,
1995. (a)
(C) Sub-Transfer Agency Agreement dated August 21, 1995. (a)
(9)
(A) Opinion of Counsel, including consent. (b)
(B) Opinion of Special Maryland Counsel, including consent. (a)
(10) (A) Consent of Independent Auditors. (c)
(B) Consent of Independent Auditors. (e)
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Not Applicable.
(16) Powers of Attorney. (d)
(a) Incorporated by reference to Registrant's Post-Effective Amendment No. 6 on
Form N-1A filed May 1, 1997.
(b) Incorporated by reference to Registrant's Post-Effective Amendment No. 7 on
Form N-1A filed April 30, 1998.
(c) Incorporated by reference to Registrant's Post-Effective Amendment No. 8 on
Form N-1A filed June 3, 1998.
(d) Filed herewith
Item 24: Persons Controlled by or Under Common Control with Registrant
None
Item 25: Indemnification
The information required by this item is incorporated herein by
reference from Post-Effective Amendment No. 4 to the Registrant's
Registration Statement on Form N-1A (Reg. No. 33-45437) under the
Securities Act of 1933, filed on February 16, 1995.
-2-
<PAGE>
Item 26. Business or Other Connections of Investment Adviser
The business and other connections of each director, officer, or partner
of the entities below in which such director, officer, or partner is or has
been, at any time during the past two fiscal years, engaged for his own account
or in the capacity of director, officer, employee, partner, or trustee are set
forth in the following tables.
(a) The following is additional information with respect to the
directors and officers of Mentor Investment Advisors, LLC:
Business, Profession,
Vocation or Employment
Position with during the past
Name Investment Adviser two fiscal years
John G. Davenport Managing Director Managing Director,
Mentor Investment
Group, LLC.
R. Preston Nuttall Managing Director Managing Director,
Mentor Investment
Group, LLC.
Paul F. Costello Managing Director Managing Director,
Mentor Investment Group,
LLC; President, Mentor
Funds, Mentor
Institutional Trust, Cash
Resource Trust, Mentor
Income Fund, Inc.; and
America's Utility Fund,
Inc.; Senior Vice
President, Mentor
Distributors, LLC;
Managing Director, Mentor
Perpetual Advisors, LLC.
P. Michael Jones Managing Director Managing Director,
Mentor Investment
Group, LLC.
Peter J. Quinn, Jr. Managing Director Managing Director,
Mentor Investment
Group, LLC.
-3-
<PAGE>
Daniel J. Ludeman Chairman Chairman and Chief
Executive Officer,
Mentor Investment
Group, LLC.
Karen H. Wimbish Managing Director Managing Director,
Mentor Investment
Group, LLC.
Terry L. Perkins Treasurer Senior Vice President,
Secretary Mentor Investment Group,
L.L.C.
Michael A. Wade Controller Vice President, Mentor
Investment Group, L.L.C.
* The address of Mentor Investment Group, LLC, Wheat, First Securities, Inc.,
Wheat First Butcher Singer, Inc., Mentor Funds, Mentor Income Fund, Inc., and
Mentor Investment Advisors, LLC is 901 East Byrd Street, Richmond, VA 23219.
-4-
<PAGE>
Item 27. Principal Underwriters:
(a) Mentor Distributors, LLC, the Fund's principal underwriter, acts as
principal underwriter for the following investment companies:
The Mentor Funds
o Mentor Growth Portfolio
o Mentor Short-Duration Income Portfolio
o Mentor Balanced Portfolio
o Mentor Capital Growth Portfolio
o Mentor Perpetual Global Portfolio
o Mentor High Income Portfolio
o Mentor Income and Growth Portfolio
o Mentor Quality Income Portfolio
o Mentor Municipal Income Portfolio
o Mentor U.S. Government Money Market Portfolio
o Mentor Money Market Portfolio
o Mentor Tax-Exempt Money Market Portfolio
o Mentor Perpetual Global Emerging Companies Portfolio
o Mentor High Yield Portfolio
o Mentor Value Portfolio
Cash Resource Trust
o Cash Resource Money Market Fund
o Cash Resource U.S. Government Money Market Fund
o Cash Resource Tax-Exempt Money Market Fund
o Cash Resource California Tax-Exempt Money Market Fund
o Cash Resource New York Tax-Exempt Money Market Fund
o Cash Resource North Carolina Tax-Exempt Money Market Fund
o Cash Resource Pennsylvania Tax-Exempt Money Market Fund
o Cash Resource Virginia Tax-Exempt Money Market Fund
Mentor Institutional Trust
o Mentor U.S. Government Cash Management Portfolio
o Mentor Fixed-Income Portfolio
o Mentor Perpetual International Portfolio
Mentor Investment Group
o Mentor Income Fund
o America's Utility Fund
Mentor Variable Investment Portfolios
o Mentor VIP Growth Portfolio
o Mentor VIP Strategy Portfolio
o Mentor VIP Balanced Portfolio
o Mentor VIP Capital Growth Portfolio
o Mentor VIP Perpetual International Portfolio
o Mentor VIP High Income Portfolio
(b) Information concerning officers of Mentor Distributors, LLC:
Name And Principal Positions And Offices Positions And Offices
Business Address* With Underwriter With Registrant
- ----------------- -------------------- ---------------------
Lynn Mangum Chairman Inapplicable
D'Ray Moore President Inapplicable
Dennis Sheehan Executive Vice President Inapplicable
William J. Tomko Senior Vice President Inapplicable
Mark J. Rybarczyk Senior Vice President Inapplicable
Kevin J. Dell Vice President and Inapplicable
Secretary
Michael D. Burns Vice President Inapplicable
David Blackmore Vice President Inapplicable
Robert L. Tuch Assistant Secretary Inapplicable
Steven Ludwig Compliance Officer Inapplicable
*Principal Address for all Officers:
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219-8000
(c) Inapplicable.
-5-
<PAGE>
Item 28. Location of Accounts and Records
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the rules
promulgated thereunder are maintained by the Fund at 901 East
Byrd Street, Richmond, Virginia 23219 or by Boston Financial
Data Services, Inc., the Registrant's transfer agent, at 2
Heritage Drive, North Quincy, Massachusetts 02171. Records
relating to the duties of the Registrant's custodian are
maintained by the Registrant's Custodian, Investors Fiduciary
Trust Company, 127 West 10th Street, Kansas City, Missouri
64105. Records relating to the duties of the Registrant's
distributor are maintained by the Registrant's Distributor,
Mentor Distributors, LLC, 3435 Stelzer Road, Columbus, Ohio
432219-8000.
Item 29. Management Services
Inapplicable.
Item 30. Undertakings
The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
-6-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, has duly caused this Post-Effective Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Richmond, and Commonwealth of Virginia, on the
26th day of February, 1999:
AMERICA'S UTILITY FUND, INC.
By: /s/ Paul F. Costello
-----------------------
Paul F. Costello
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities indicated on the 26th day of February, 1999:
*
______________________________ Director, President and
Daniel J. Ludeman Principal Executive Officer
*
______________________________ Director
Louis W. Moelchert, Jr.
*
______________________________ Director
Thomas F. Keller
*
______________________________ Director
Arnold H. Dreyfuss
*
______________________________ Director
Troy A. Peery, Jr.
*
______________________________ Director
Peter J. Quinn, Jr.
*
______________________________ Director
Arch T. Allen, III
-7-
<PAGE>
*
______________________________ Director
Weston E. Edwards
*
______________________________ Director
Jerry R. Barrentine
*
______________________________ Director
J. Garnett Nelson
/s/ Terry L. Perkins
______________________________ Treasurer, Principal
Terry L. Perkins Accounting Officer, and
Principal Financial
Officer
*By: /s/ Paul F. Costello
--------------------------
Paul F. Costello
Attorney-in-fact
-8-
<PAGE>
INDEX TO EXHIBITS
(16) Powers of Attorney
-10-
POWER OF ATTORNEY
We, the undersigned Directors of America's Utility Fund, Inc. (the
"Fund"), hereby severally constitute and appoint Daniel J. Ludeman, Paul F.
Costello and Peter J. Quinn, Jr., and each of them singly, our true and lawful
attorneys, with full power to them and each of them, to sign for us, and in our
names and in the capacities indicated below, the Registration Statement on Form
N-1A of the Fund and any and all amendments (including post-effective
amendments) to said Registration Statement and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto our said attorneys, and each
of them acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in the premises, as fully to all
intents and purposes as he might or could do in person, and hereby ratify and
confirm all that said attorneys or either of them may lawfully do or cause to be
done by virtue thereof.
WITNESS our hands and common seal on the date set forth below.
SIGNATURE TITLE DATE
/s/ Daniel J. Ludeman
- ------------------------- Chairman; Director November 10, 1998
Daniel J. Ludeman
/s/ Paul F. Costello
- ------------------------ President; Principal November 10, 1998
Paul F. Costello
Executive Officer
/s/ Terry L. Perkins
- ------------------------ Treasurer; Principal November 10, 1998
Terry L. Perkins Financial and
Accounting Officer
/s/ Peter J. Quinn, Jr.
- ------------------------ Director November 10, 1998
Peter J. Quinn, Jr.
/s/ Arnold H. Dreyfuss
- ------------------------ Director November 10, 1998
Arnold H. Dreyfuss
/s/ Thomas F. Keller
________________________ Director November 10, 1998
Thomas F. Keller
-1-
<PAGE>
/s/ Louis W. Moelchert, Jr.
- -------------------------- Director November 10, 1998
Louis W. Moelchert, Jr.
/s/ Troy A. Peery, Jr.
- -------------------------- Director November 10, 1998
Troy A. Peery, Jr.
/s/ Arch T. Allen, III
- -------------------------- Director November 10, 1998
Arch T. Allen, III
/s/ Weston E. Edwards
- -------------------------- Director November 10, 1998
Weston E. Edwards
/s/ Jerry R. Barrentine
- -------------------------- Director November 10, 1998
Jerry R. Barrentine
/s/ J. Garnett Nelson
- -------------------------- Director November 10, 1998
J. Garnett Nelson
-2-
